The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) comprising Shri Annapurna Gupta, AM and Shri T R Senthil kumar, JM has held that adjustment u/s 143(1)(a) is not permissible on a debatable issue.
The assessee a charitable trust registered under the Income Tax Act, 1961 and enjoying benefits of sections 11 and 80G of the Act. The assessee has filed its return of income declaring Rs.2,31,725/-which was processed under section 143(1) of the Act wherein income of the assessee has been determined at Rs.26,95,625/- and demanded tax of Rs.7,02,246/-The assessee has been reduced amount from the intimation to Rs.2,51,182/- and deduction of Rs.21,75,000/- claimed under section 11(2) which was not allowed and increased total income of Rs.26,95,695/- as against the returned income of Rs.2,31,730/-.
The appellant contended that CIT(A) has erred by confirming the reduction of claim for deduction by allowing deduction of only Rs.2,51,182/- instead of deduction claimed of Rs.540,082/-, which is rightly and validly allowable u/s.11(1) of the I.T. Act, 1961 as per return of income filed by the Appellant.
It was observed that the process of dealing with the return was an ex-parte process and viewed that whenever any debatable issue was involved an explanation of the assessee was required and no prima facie adjustment in ex-party proceedings can be made. In light of the judgment in the case of CIT Vs. Natwarlal Chowdhury Charity Trust it was observed that both the issues were debatable, where more than one opinion was possible and adjustment u/s 143(1)(a) was not permissible on both aspects.
The Tribunal held that when the disallowances were being made u/s 143(1) of the Act and similar disallowance made was a debatable issue should not be done in an intimation u/s 143(1)(a) of the Act. The appeal of the assessee was allowed. The assessee was represented by Ms. Arti N. Shah and the revenue was represented by Shri Alpesh Parmar.
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